The Department of Health has become embroiled in a row over a GP practice’s plans to open a branch surgery, after a PCT refused to allow the development to proceed, despite the Co-operation and Competition Panel (CCP) ruling in the practice’s favour.

The panel last month ruled in favour of Churchill Medical Centre after concluding that NHS Kingston’s decision to prevent the practice from expanding nearby was ‘inconsistent’ with competition rules.

But the PCT has refused to give permission for the practice to open its branch surgery until they are given directions by either the Department of Health or NHS London.

The competition panel has no legal power, but was set up by the Government to rule on cases where the Principles and Rules for Co-operation and Competition were in danger of being breached.

In December, it concluded that the PCT’s decision to deny the opening of a branch surgery was anti-competitive and restrictive to patient choice.

But in a letter to the practice, seen by Pulse, David Smith, chief executive of the PCT said: ‘The CCP report makes recommendations to the Department of Health and to NHS London regarding the branch surgery. Until such time as the DH and NHS London has considered the report, we will not give you permission to open the branch surgery.’

Dr Charles Alessi, a GP at the Churchill Medical Centre, said he was bemused that the PCT was still unwilling to allow them to open the branch surgery, despite the panel’s recommendation.

He said: ‘The competition panel can’t force [a decision], but it has been set up by the Secretary of State so one would assume that if they have found that the actions of the PCT breached elements of competition, the PCT take note of that.’

‘We are in a rather odd situation. We have contacted the DH and we are told that there will be some determination over the next few weeks. But there is a concern that the determination may include looking at the case yet again.

Dr Alessi said he hoped the DH’s determination would draw a line under the case, to allow them to provide a better service for their patients.

‘The whole basis of the competition panel’s verdict is that potentially our population is being denied choice and is being disadvantaged. That is being allowed to continue. One would hope the DH issue an instruction and we move on.’

The Liberal Democrats have joined the Tories in condemning health secretary Andy Burnham’s pledge to treat the NHS as the ‘preferred provider’.

Speaking at private firm Circle Health’s conference in Bath last week, Liberal Democrat health spokesman Norman Lamb said the move to give NHS providers at least two chances to improve before allowing alternative providers to run services would severely hamper attempts to ramp up productivity in the NHS.

Mr Lamb said providers should be judged on quality, not on their status, and accused Labour of being in the pockets of the unions.

The move aligns the Lib Dems with the Conservatives, who have vowed to open up the market to more providers if elected, and, as Pulse revealed last week, have already begun talks with a host of private firms.

Mr Lamb said: ‘I strongly disagree with the secretary of state’s provider pledge; it is a stitch up with the unions. It will set back the task of improving productivity; you need that challenge to existing providers.’

He added: ‘You need that insurgency [from new providers]. It’s never the traditional providers coming up with the innovative ideas. The test should be quality.’

Shadow health secretary Andrew Lansley, also speaking at the event, accused Labour of back-peddling on its reform agenda, but said his party would push ahead with stimulating competition.

He said: ‘Not only was wave 2 of ISTCs abandoned, but Andy Burnham’s pledge is being interpreted as abandonment of any willing provider. The reform process hasn’t been pursued, and isn’t coherent. I will pursue any willing provider. As far as we can we should create a level playing field, and realise the benefits of competition.’

The views of both opposition parties were backed by Ali Parsa, chief executive of Circle, who urged the next Government to lower the drawbridge to all potential market entrants, and not waste time protecting existing providers.

He said: ‘We have a fundamental challenge. We now have to focus relentlessly on improving quality while reducing cost. Do we gamble on incumbents to make these changes? I don’t think they will be successful.’

‘My appeal to politicians is to bring down the barriers to entry. Do not waste your time and energy backing the British Leylands of this world. Let the talent come through. We have wasted billions of pounds supporting incumbents. Create the policies that lower the barrier to entry. It costs us nothing.’

Questions have been raised over the implications for competition and world class commissioning of health secretary Andy Burnham’s statement that the NHS is the “preferred provider” of services.

Previous Department of Health policy had been that “any willing provider” should be considered when commissioningservices.

But in a speech last week at the King’s Fund, in whichMr Burnham stressed the importance of raising quality, he said: “The NHS is our preferred provider. But it is the important job of the commissioner to test whether these services provide best value and real quality.

“Where a provider is not delivering quality – and the new accountability information will more readily demonstrate that – we will set out a clearer process that will provide an opportunity for existing providers to improve before opening up to new potential providers.”

Answering questions after his speech, he said NHS providers should be given at least one opportunity to improve before commissioners went out to tender for an alternative provider.

Unison senior national officer for health Mike Jackson told HSJ the speech was significant: “I think now there’s clarity that the NHS is the preferred provider and there ought to be co-operation before competition.”

But Primary Care Trust Network director David Stout said the speech “would potentially cross over quite a number of the co-operation and competition panel principles”.

A DH spokeswoman said: “The health secretary signalled the need to clarify policy and guidance to ensure that whilst putting quality of the heart of everything we do in the NHS, staff were treated fairly by being given an opportunity to improve performance and services before commissioners considered engaging with alternative providers.”

One of the Department of Health’s integrated care pilot schemes is to be investigated by the co-operation and competition panel to see if it breaches merger, choice and competition rules.

Under pilot scheme, City Hospitals Sunderland foundation trust plans to merge with a local GP practice. The merger would represent a case of “vertical integration”, which the DH has been wary of due to concerns acute trusts could use control of a GP practice to drive up the number of acute referrals.

DH competition rules, published in 2007, state that primary care trusts must seek permission from the department before contracting for “list-based primary care services” through a hospital provider.

The panel’s investigation will use the Sunderland case to test assumptions and concerns about vertical integration. In a statement, the panel said it would “assess the extent to which the integrated care scheme may limit patient choice in relation to the type of NHS-funded healthcare services provided by each [provider]”.

It will also assess any benefits the model brings patients and taxpayers.

The panel is inviting submissions from interested parties. The closing date is 26 June. The earliest date for the completion of the investigation is early August, with the possibility of it continuing until the end of November if the issues are deemed complex.

Private companies must take on more risk if they want to gain a bigger share of the primary and community care market.

Harrow primary care trust chief executive and chair of the London PCTs’ commercial board Sarah Crowther said the perception within the health service had been for some time that risk sharing had been working in favour of the independent sector.

She said: “Perhaps what [independent sector providers] need to think about for the next period of time is how do you incentivise PCTs to change some of their provider relationships, to have the confidence to work with you.”

Ms Crowther, speaking at an NHS Confederation seminar, said the DH commercial directorate, which has been replaced by local commissioning support units, “hadn’t done the independent sector any favours” by negotiating costly deals which loaded risk back onto the NHS.

She said: “The days when it was all about how do you get the independent sector involved are gone. Actually what we’re interested in as commissioners is who is the right provider to give us the right deal to provide the right service.”

But she acknowledged not all PCTs would be taking the same approach to competition and co-operation.

“That may not be perfect, but it’s the reality. Get over it,” she said.

She advised independent providers to think about taking on projects that were not of optimum size in the first instance, in order to build a track record.

Linked to that, PCTs needed to get better at building relationships, she added.

And the private sector would need to tell commissioners how it was going to help them take capacity out of the health system.

Over the coming years, the NHS faces the challenge of continuing to improve the quality, accessibility and range of services for patients while driving efficiency hard and securing better value for money for the taxpayer. Reforms over the past decade – plurality in provision, improved commissioning, greater choice, more information for patients and contestability – provide a powerful set of levers and a tremendous opportunity to meet this challenge.

Over the last eight months, we have worked closely with a wide range of partners – including NHS providers, commissioners, the independent sector, suppliers of health goods and services, procurement experts, the Treasury, the Office of Government Commerce (OGC) and staff in the Department of Health (DH) – to identify how improved commercial capability can help meet our shared aspirations for the NHS in England. The strong consensus has been that the NHS and DH need commercial skills as never before. There is also agreement that existing arrangements and status quo will not deliver the step-improvement in capability now required for the challenging times ahead.

This document sets out why commercial skills are now integral to the NHS at all levels. It describes a new operating model for commercial capability – the way commercial skills will be organised and applied at different levels across the NHS to have maximum impact – drawing heavily on the discussions of the past months. It outlines the benefits for key groups in the NHS and DH and it sets out how we are committed to working with a range of delivery partners to bring the new operating model into being quickly – and in doing so make a timely and telling response to the ambitious efficiency challenge laid down in the 2009 Budget.

A £20m network of around 20 commercial support units will be set up to boost primary care trusts’ efforts to stimulate the market.

The Department of Health’s commercial strategy, expected today, confirms that it will axe the commercial directorate and the NHS Purchasing and Supply Agency.

DH director general for commissioning and system management Mark Britnell said the plans were the DH’s first formal response to the Budget and would help the NHS “meet some of the challenges laid out”.

The Budget said PCTs will be expected to save £500m a year through more efficient commissioning. Market stimulation was the area commissioners performed worst at in the first year of world class commissioning.

Mr Britnell told HSJ that if commissioners did not understand how to stimulate the market, the NHS “would not be in the strongest position to meet the downturn”.

The units, which will employ lawyers and accountants, are tasked with boosting performance on market stimulation and contracting, supporting commissioners and providers, and providing a point of contact for the third, voluntary and private sectors.

But PCTs will still be legally responsible for all contracts in their areas.

PCTs will be encouraged to participate by being held back at level one in world class commissioning’s market stimulation and contract management competencies unless they can show they are performing at the same level as the units.

The DH hopes joint working through the units will allow commissioners to pool the available talent and improve more quickly.

“And as we move into a colder economic climate for public services, we don’t wish to encourage PCTs to have stand-alone commercial and procurement functions.”

The Purchasing and Supply Agency’s sourcing activities will be merged into the Office of Government Commerce’s Buying Solutions agency – including setting up an NHS-facing buying arm.

Other activities will move into the new regional units and local procurement hubs will be expected to realign with the regional units to boost the NHS supply chain’s efficiency.

The DH will have a new procurement, investment and commercial division to strengthen its commercial and procurement support, and a strategic market development unit, to provide leadership and support for commissioners in market analysis and market-making.

The NHS been advised by management consultants to ramp up competition between GPs by providing each patient with a choice of up to five local practices.

A briefing document by Ernst and Young, circulated to PCTs by Government policy body NHS Primary Care Contracting, concludes a high level of patient ‘churn’ is essential to ensuring healthy competition.

One PCT chief executive argued that patients should be able to switch GP as frequently as their gas or broadband supplier.

The new advisory document comes a month after a series of SHA assessments of PCT commissioning skills found even those that had embraced APMS had failed to sufficiently open up the primary care market.

The Ernst and Young briefing, sent to all PCTs, argues ‘competitive tension’ is key to ensuring quality, and sets out a series of ‘market management levers’ trusts can use to encourage greater rivalry among providers in both primary and secondary care.

Patient switching, defined as ‘the ‘churn’ in a market’, is identified as a key indicator of competition, with switching of up to 60% in some markets described as ‘optimal’.

‘Switching provides the stimulus for providers to improve or maintain quality of service,’ the guidance states.

PCTs should encourage competition even in areas where providers already offer high standards, it adds, with optimum switching occurring where there was a choice of between three and five local options: ‘Patients’ rights to choose their provider may mean that intervention is needed in uncompetitive markets even if quality is high.’

Dr Sarah Crowther, chief executive of Harrow PCT, told policy makers at a Westminster Health Forum event: ‘The level of switching we see between practices is still very limited.

‘Our population changes its gas supplier or its broadband supplier more readily than its local GP. That has to be something we as a PCT try to promote.’

But Dr Fergus McCloghry, chair of Harrow LMC, reacted angrily to the comments, which he said would further reduce patients’ continuity of care.

‘It’s another attempt at undermining what’s good about general practice,’ he said.

‘There is no doubt if a patient’s unhappy they should change, but not it’s just a question of changing doctors for the sake of changing.

‘What you get from one doctor is not going to going to cost more or less than what you get from another doctor because you’re not paying.’

ERNST AND YOUNG GUIDE FOR PCTS: UNDERSTANDING HEALTHCARE MARKETS

PCTs need to define healthcare markets and consider the current state of competition – including market segmentation, geography and competition type

Trusts should assess market dynamism – specifically looking at the number of providers offering choice, market concentration, proportion of patients switching and rivalry between providers

PCTs should draw up market priorities and then deploy a range of market management levers, including publishing greater comparative information between providers, altering key performance indicators and where necessary decommissioning existing providers

The paper from primary care researchers at the University of Birmingham says the Government’s drive to stimulate competition between providers is likely to back-fire as private providers are concerned about the financial viability of the contracts on offer.

The editorial – published in the British Medical Journal today – outlines the results so far in the bidding process for GP-led health centres and notes that the main beneficiaries seem to be a new breed of GP entrepreneurs rather than the private sector, as Pulse revealed last year.

‘Corporate providers are unlikely to have the local knowledge, networks, and visibility of local GPs. This can make it hard to show commissioners how they will establish themselves within the local community and make links to other providers.’

The paper goes on to say private providers struggle to develop financially viable bids, due to the financial climate and the demands of PCTs to only pay for the patients they attract.

‘Some PCTs are expecting successful bidders to assume a greater degree of financial risk over time, based on their ability to attract patients. Providers are reassessing their willingness to take on this risk, especially in areas where primary medical care services are already well provided,’ it says.

The extra capacity generated by the GP-led health centres would have to be managed carefully if Government’s policies are to deliver real benefits for patients, concludes the researchers from the Health Services Management Centre in Birmingham.

PCTs are set to dramatically ramp up efforts to entice the private sector into primary care after failing to meet Government targets to increase competition.

A series of detailed SHA assessments of PCTs commissioning skills found they had not gone far enough to open up the primary care market.

Reports carried out under the Government’s World Class Commissioning scheme show even trusts that have embraced APMS have failed to achieve above average scores, which is set to lead to a renewed drive to meet future targets.

The NHS Confederation said it expected many PCT-run surgeries to be farmed out to APMS, as trusts look to entice private providers to run GP services.

The reports, many of which marked PCTs down from their self-assessments, offer detailed advice on how trusts can stimulate the market by next year’s assessment.

NHS Berkshire West was marked down on two of the three categories for stimulating the market, and advised to ‘encompass a wider range of services provider’.

NHS Suffolk, which scored level one, the lowest score, on all aspects of stimulating the market was advised to ‘continue building on its active approach to tendering’.

Even Camden PCT, which handed three practices to US healthcare giant UnitedHealth last year, was marked down to level one on all three categories for stimulating the market.

David Stout, director of the NHS Confederation’s PCT Network, said it was unsurprising to see PCTs struggling as the market was ‘very new for the NHS’.

He said: ‘[The indicator] is asking, “Are there concerns about quality, and are there alternative providers who could add something?”. If there are, how do you encourage them to participate?’

Mr Stout said while he didn’t necessarily envisage an immediate expansion of APMS, he did expect many PCT-run services and any new contracts to be tendered.

He said: ‘Where APMS will be used is where new services will be commissioned. From a competition point of view, you’d be hard pressed not to use APMS.’

But Dr Chaand Nagpaul, GPC negotiator with responsibility for commissioning, said the drive to increase competition had ‘nothing to do with improving healthcare’.

‘This highlights how PCTs can be diverted into pursuing meaningless political targets rather than supporting and developing existing GP practices.’

A Department of Health spokesperson said: ‘PCTs are expected to stimulate and shape the market including a number of providers from voluntary, NHS, private, local government sectors and others.’